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3 February 2010

Philippines expects strong peso to help temper inflation

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The central bank of the Philippines (BSP) expects the peso to remain strong this year and help temper the rise in consumer prices, keeping it within the government’s ceiling, reported the Philippine Daily Inquirer.

According to the BSP, the strength of the peso will be sustained this year given the improvements in investment sentiment worldwide. Confidence, especially on emerging economies, will help increase foreign capital flows that, in turn, will keep the peso strong.

“The appreciation of the peso resulting from foreign exchange inflows could temper the increase in domestic prices of imported commodities,” according to the minutes of a recent meeting among members of the BSP’s Monetary Board.

The peso’s appreciation to the 46-to-a-dollar level started late last year as portfolio inflows to emerging markets began to rise due to easing global economic concerns.

Monetary officials said the Philippines and other emerging economies would benefit from renewed investor confidence given the resiliency shown by these countries at the height of the global.

Although the peso remains in the 46 level, it temporarily moved into the 45 territory in January.

Latest “hot money” data from the BSP showed that the Philippines registered $147 million in net foreign portfolio investments in the first two weeks of January, improving from $121 million in the same period last year.

According to the minutes of the Monetary Board meeting, the BSP further said that inflation outlook of the private sector remained benign and in line with the government’s official target.

The BSP this year has set a goal of keeping inflation within a range of 3.5 and 5.5 percent. Monetary officials said its latest estimates showed that the average increase in consumer prices would not reach 5 percent and likely settle at only 4.7 percent.



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